According to Reuters, on June 18, despite opposition proposals from two major proxy advisors, Toyota Motor Corporation's Chairman Akio Toyoda and nine other board members were successfully re-elected at the company's annual shareholder meeting. This indicates that shareholders have set aside concerns about corporate governance and certification test scandals.
However, Akio Toyoda's re-election was not entirely unexpected. Several key factors contributed to this outcome. Firstly, other subsidiaries under the Toyota Group hold substantial shares in Toyota, providing crucial support for Toyoda. Secondly, in 2023, Toyota's revenue and net profit both saw significant growth, and its stock performance was strong, indicating robust development under Toyoda's leadership. Additionally, as the grandson of Toyota's founder, Akio Toyoda remains popular among Japanese retail investors, who make up 12.6% of the company's shareholders.
In 2023, Akio Toyoda was re-elected with nearly 85% of the vote, though this was lower than the 96% he received in 2022. Since then, Toyota, one of the world's largest automakers, has faced a series of scandals involving its subsidiaries, including mini-vehicle manufacturer Daihatsu, and itself.
If shareholder support for Toyoda declines further this year-a figure to be announced on June 19-it may prompt Toyota to advance governance reforms. Analysts suggest that accelerating the unwinding of cross-shareholdings could be a viable reform measure.
ISS (Institutional Shareholder Services) questioned Toyota's handling of issues. New York City's public employee pension funds agreed with ISS's position and voted against Toyoda's re-election. Michael Garland, who oversees corporate governance for these funds, wrote in an email statement, "Setting the tone at the top is critical." Glass Lewis, another proxy advisory firm, recommended for the second consecutive year that shareholders oppose Toyoda's re-election, citing concerns over the board's lack of independence and Toyota's strategic shareholdings and equity return rates. Most opposition to Toyoda is expected to come from foreign investors, who make up a quarter of Toyota's shareholder base.
Hidenori Takahashi, 84, told Reuters before Toyota's annual shareholder meeting, "I bought Toyota's shares with my pension." He added that Toyota is still regarded as "the best company in Japan" by shareholders. However, he noted that Toyota's recent safety certification issues are undoubtedly a "bad thing," but the company seems to be actively taking measures to prevent such misconduct from happening again. Despite measures taken by Toyota to address the incident, more certification violations have been exposed, which remains a concern.
In early June, Toyota admitted to improperly conducting six different vehicle certification tests, including on three models still being sold. Toyota stated that some tests were conducted under stricter conditions than government regulations, rendering the results invalid. Since the certification violations were exposed, Toyota's stock price has fallen by 10%. However, since the beginning of the year, Toyota's stock price has risen by 18%.
Koji Sato, who succeeded as CEO last year, reiterated apologies for the certification issues. However, neither Sato nor Toyoda directly addressed the proxy advisors' recommendations. On June 18, shareholders also rejected an investor proposal urging Toyota to disclose more about its climate lobbying activities.
